FCC removes Section 271 concerns from RBOC fiber plans

As expected, the FCC late Friday ruled that states cannot require RBOCs to unbundle new networks under the guise of Section 271 obligations that paved the way for the carriers to enter the long-distance market.

Under the triennial review order passed last year, the FCC granted incumbent carriers unbundling relief for fiber-to-the-home (FTTH) deployments--a finding that was expanded to fiber-to-the-curb (FTTC) projects earlier this month--under Section 251 of the 1996 Telecom Act. However, many state regulators said they could require RBOCs to share new fiber networks with competitors, because the RBOCs agreed to unbundle their networks as a condition for getting state approvals to enter the long-distance market.

While RBOCs have sought multiple clarifications granting various levels of unbundling relief associated with fiber buildouts, getting the Section 271 relief was "the Big Kahuna," according to one RBOC official who requested anonymity. Indeed, both SBC Communications and Verizon Communications cited the promise of the Section 271 relief--widely reported for two weeks--as a key reason they were willing to commit to their fiber-buildout announcements this month.

Chairman Michael Powell and fellow Republican commissioners Kathleen Abernathy and Kevin Martin voted for the Section 271 relief item, while Democratic commissioner Michael Copps dissented. Democratic commissioner Jonathan Adelstein dissented in part.

"The item eliminates barriers to companies that provide customers with an assortment of new services and applications including interactive educational content, improved telecommuting, life-saving telemedicine applications, real-time two-way sign language conversations with people with disabilities, and enhanced video-on-demand services in competition with cable operators," Powell said in a revised statement released today.

Copps sharply criticized the order in his statement.

"Today, the majority pounds another nail into the coffin it is building for competition," Copps said. "There is now absolutely no obligation to provide competitive access to any broadband facilities--from fiber-to-the-home to fiber-to-the curb to packetized functions of hybrid loops to packetized switching capabilities--at just and reasonable rates."

In particular, Copps said the commission is wrong to rely too much on the promise of intermodal competition from wireless, satellite and broadband over power line to justify deregulatory policies instead of waiting for those newer technologies to mature.

"This Commission’s most recent report on high-speed services shows that the residential and small business market is a duopoly," Copps said. "Our data show that new satellite and wireless technologies--exciting though they are--together serve only 1.3% of this market. Broadband over power line does not yet even register. Yet the majority chooses to ignore the commission’s statistics, preferring instead sweeping rhetoric about regulatory relief and broadband competition.

"One problem here is that the majority gets so carried away with its vision of the country’s telecom future that they act like it is already here, that competition is everywhere flourishing, and that intermodal competition is already ubiquitous reality. But their cheerful blindness to stubborn market reality actually pushes farther into the future the kind of competitive telecom world they say they want."

One apparent point of contention in the order is its impact on line sharing. Martin said he believes the order means RBOCs do not have to provide unbundled line sharing, while Powell said the matter is not addressed. Many analysts expect the commission to clarify line-sharing obligations when it issues permanent rules for unbundled network elements (UNEs)--something Powell has vowed will occur in December.

Verizon announced its support of the Section 271 decision but said the commission has not completed its work to align its broadband regulations with its stated investment-friendly policies.

"As the Commission moves closer to the creation of a national broadband policy, it now needs to reinforce its forward-looking, pro-investment position by ensuring that minimal regulations apply to broadband-based services and to clarify the definition of 'mass market' and 'enterprise' customers," Susanne Guyer, Verizon’s senior vice president of federal regulatory affairs, said in a prepared statement.

Others believe the work is largely done. The Section 271 ruling gives RBOCs a "clean sweep" on the regulatory front, giving them "the keys to the ‘last mile’ kingdom," according to Medley Global Advisors telecom analyst Jessica Zufolo.

"The regulatory relief granted today is the crown jewel of the Bells' regulatory strategy to be rid of all vestiges of federal unbundling obligations specifically as it relates to last-mile fiber facilities," Zufolo said in a report issued Friday. "The item also presumes that the Bells are no longer dominant for purposes of regulatory oversight in the broadband market."